If you're one of those people who's obsessed by things that go bump in the night, this either is or isn't the film to see - it all depends on whether you go back to sleep after hearing them. Made for $15,000 and having taken over $100m in the US, 'Paranormal Activity' shows just how much you can scare people with a good (not new) idea and a bit of imagination.

Katie (Featherston) is getting increasingly freaked out by strange night time noises in the house she shares with sceptical boyfriend Micah (Sloat), so he decides to mic up the house and leave a video camera running all night in their bedroom.

Katie, it must be said, has form: the family home burned down when she was eight-years-old and both she and her sister were aware of an eerie presence in their room in the months beforehand. Micah still isn't convinced, but the next three weeks will prove to him that some things just can't be explained away.

It's a testament to newcomer Peli's skills as a director that even though the words 'Blair Witch' are so prominent in your mind that they might as well be in 15-foot luminous letters above the cinema screen, he still manages to suck you in to this grainy story of two people and their wide awake nightmare.

What 'Paranormal Activity' does very well are the things that most modern horror movies forget to do: build up the tension and get the audience to tap into fears from their own lives. Featherston and Sloat do a good job of making you forget that you're watching actors, not a real, caught on camera couple and the lack of big budget special effects (a swinging lampshade, strange thuds, nightvision shots of a bedroom) just add to the film's ominous energy. And that's before the boyfriend from the idiot kingdom utters the classic line, "I'm going to get a Ouija board."

While applauding Peli's efforts, the unshakeable among scary movie fans may feel that he could have done a bit more to get them wishing for their comfort blanket, and if 'Paranormal Activity' has a fault it's that opportunities were missed here to mess with people's minds even further. That said, Peli has a very bright (dark?) future ahead of him and it will be fascinating to see what he can manage with a few more zeroes and the success of this film on his back.

While it's hard to say if 'Paranormal Activity' will have much of an afterlife on DVD - it's a real throw the popcorn experience - plenty of people will be thinking about it in the middle of the night for a long time to come.